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Mthuli Ncube to tax US dollar cash withdrawals
40 mins ago |
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Treasury has proposed a new progressive tax on foreign currency cash withdrawals, a move that has drawn immediate criticism from the financial sector for potentially discouraging formal banking. The proposal was outlined by Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube while presenting the 2026 National Budget Statement in Parliament.
Minister Ncube argued that the tiered levy on US dollar withdrawals is necessary to curb tax evasion, reduce economic informality, and encourage a shift towards digital payments. He noted that physical US dollar cash, which accounts for over 90 percent of all cash transactions, undermines transparency, limits transaction traceability, and hampers effective tax administration.
Under the proposed Cash Withdrawal Levy, individuals will not pay any tax on monthly withdrawals between US$1 and US$500. Withdrawals from US$501 to US$1,000 will attract a 2 percent levy, while amounts exceeding US$1,001 will be subject to a 3 percent tax. Corporate withdrawals up to US$5,000 per month will remain exempt, with amounts between US$5,001 and US$10,000 taxed at 2 percent, and withdrawals above US$10,000 subject to the 3 percent levy. Local currency transactions will remain untaxed.
The Minister cited alarming figures showing that ATM withdrawals averaged US$265.8 million per month between April 2024 and June 2025, with a peak of US$353 million in June 2025. Banks have had to maintain nearly US$1 billion in cash and Nostro balances to meet demand. Treasury warned that continued high cash withdrawals heighten risks of informality, tax evasion, corruption, and administrative inefficiencies.
The proposal, however, has drawn sharp criticism from banking insiders. A senior banker, speaking on condition of anonymity, described the measure as "counterproductive" and said it risks driving transactions back into the informal sector. "This tax simply punishes customers for using their own money and will inevitably drive the very transactions the Minister wants to formalise straight back into mattresses and the black market," the source said.
The progressive levy is expected to be closely scrutinised by both financial institutions and the public as the government seeks to balance revenue collection with economic formalisation.
Minister Ncube argued that the tiered levy on US dollar withdrawals is necessary to curb tax evasion, reduce economic informality, and encourage a shift towards digital payments. He noted that physical US dollar cash, which accounts for over 90 percent of all cash transactions, undermines transparency, limits transaction traceability, and hampers effective tax administration.
Under the proposed Cash Withdrawal Levy, individuals will not pay any tax on monthly withdrawals between US$1 and US$500. Withdrawals from US$501 to US$1,000 will attract a 2 percent levy, while amounts exceeding US$1,001 will be subject to a 3 percent tax. Corporate withdrawals up to US$5,000 per month will remain exempt, with amounts between US$5,001 and US$10,000 taxed at 2 percent, and withdrawals above US$10,000 subject to the 3 percent levy. Local currency transactions will remain untaxed.
The proposal, however, has drawn sharp criticism from banking insiders. A senior banker, speaking on condition of anonymity, described the measure as "counterproductive" and said it risks driving transactions back into the informal sector. "This tax simply punishes customers for using their own money and will inevitably drive the very transactions the Minister wants to formalise straight back into mattresses and the black market," the source said.
The progressive levy is expected to be closely scrutinised by both financial institutions and the public as the government seeks to balance revenue collection with economic formalisation.
Source - The Herald
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